Top Stories Last Week
• S&P 500 Index Rose the Sixth Week in a Row
The Standard & Poor’s 500 Index, the broad benchmark for U.S. stocks, rose 0.4%, the sixth week of rally in a row. However, MSCI EAFE index lost 1.5% and MSCI Emerging Market Index was down by 1.3%. Gold was up slightly by 0.1% and the GSCI commodity index lost 0.2%. The bond markets gained for the week, Barclays US Treasury index rose 0.6% while US high yield bonds were lower by 0.5%.
• US Services Industries Continued to Expand, According to ISM
Service industries in the U.S. expanded in January at about the same pace as December, driving demand for more workers and helping cushion the economy in the face of the battle on fiscal cliff. The Institute for Supply Management’s non-manufacturing index slipped to 55.2 from a 10-month high of 55.7 in December. Readings above 50 still signal expansion. The employment gauge was the strongest in seven years.
• ECB and BOE Kept Interest Rates Unchanged
The European Central Bank elected to leave the euro area’s benchmark refinancing rate unchanged at 0.75% and the deposit rate unchanged at 0.5%. The ECB President Mario Draghi faced questions on three fronts: the surging euro exchange rate, Ireland’s plans to liquidate nationalized bank Anglo Irish, and the Italian bank scandal. He cited the rising value of the euro as a possible threat to the region’s economic recovery, comments that immediately sent the euro down sharply against the dollar and yen.
Separately, the Bank of England also kept its benchmark interest rate unchanged at 0.5%, amid worries that the British economy could fall back into a recession for the third time in five years. The pound has been falling against the euro and the dollar this year, pressured by investor concerns that the British economy continues to struggle.
• Reserve Bank of Australia Kept Interest Rates Intact, but Opened Door for More Easing
The Reserve Bank of Australia kept interest rates unchanged, but reduced its economic growth and inflation forecasts as investment outside the mining industry remains elusive, the labor market softens and a high local currency contains prices. The outlook for prices gives scope for further rate cuts if needed to boost demand.
Top Stories to Watch This Week
• Obama’s State of Union Address
President Obama will deliver his first State of the Union address in his second term. It is likely that job creation, immigration reform, gun control and debt deductions will be the major issues.
• G20 Finance Ministers Meeting in Moscow
The first G20 Finance Ministers and Central Bank Governors’ Meeting will be held on February 15-16 in Moscow. Delegates are going to discuss traditional G20 agenda, such as global economy outlook, implementation of the G20 Framework agreement for strong, sustainable and balanced growth and financial regulations.
• Retail Sales in the U.S.
Economists expect the retail sales to increase by 0.3% in January, slower than 0.5% in December.
• Bank of Japan Monetary Policy Decision
Bank of Japan will decide on monetary policy and is likely to keep interest rates at 0.1%. However, more bond purchases are expected.